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Are We Experiencing a Social Enterprise Bubble?

Social enterprises can only go as far as consumers will take them, which raises the fear that we are experiencing a social enterprise bubble as opposed to the birth of a long-term trend.

The power of the consumer

Social entrepreneurship is primarily powered by one thing: consumer awareness to the need for more responsible consumption. While it’s true that social enterprises often expose societal ills that would go otherwise overlooked, those issues will go unaddressed if people aren’t willing to put their money towards them.

Is there a sustainable and growing base of customers who are willing to vote with their dollar and continue to feed the spread of social responsibility? The numbers so far are high on optimism, but aspirations of buying better don’t always translate to reality.

Here’s what we mean: A study conducted by Good. Must. Grow. last year found small increases in the number of people willing to buy from companies they see as socially responsible (32 percent, up from 29 percent two years prior). Also trending upward was the percentage of people who saw buying from socially responsible companies as “important.” But the percentage of people who actually did buy socially responsible products decreased slightly. This is despite the fact that we’re living in a relative golden age of social entrepreneurship.

These numbers are part of the reason why some fear we’re living in a social enterprise bubble. Is there a future for social entrepreneurship that rivals the success current entrepreneurs in the space are experiencing?

If so, it will likely need to come as a result of these factors:

Better promotion of the “social” in social enterprise

It’s thought that perhaps social enterprises aren’t doing a good enough job of making their presence known: 46 percent of those surveyed by Good. Must. Grow. said they didn’t buy responsibly products and services because they didn’t know how to find them. Outside of a few well-known companies like TOMS, few can name multiple successful social enterprises.

Why is TOMS so successful when it comes to recognition of its brand and mission? Perhaps that’s because the two are inextricably linked: The business of selling shoes can’t be separated from their goal of providing people with shoes. It’s an easy proposition to explain and remember, and is more tangible to consumers than more vague promises like sustainable sourcing of ingredients or donations to a variety of charities.

Remember: Social enterprises are as much about business as they are about social responsibility. The most successful organizations are ones that use their practices and mission as marketing tools. Which brings us to our next point.

Focusing on the business over social aims

As discussed in previous articles, social enterprises are not nonprofits or charities. But while they are also not strictly “businesses” as we often understand them, they can’t afford to prioritize their social mission over their business aims.

As with any business, wasteful practices and inefficiencies will sink a social enterprise that tries to invest too much in their social mission. On the other hand, enterprises that are stable and receive income from diverse revenue streams will be in a better position to have a social impact and begin a positive feedback loop: The more profitable and well-known they are, the easier it will be to expand the mission.

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In this vein, while there will likely always be a small subset of people willing to pay more for a Fair Trade or otherwise sustainable product no matter what, consumers will generally flee from a costly yet inferior product. People are more inclined to buy a sustainable product if the quality and cost are comparable to an “industrial” or less responsible product.

But now many mainstream companies like Starbucks are willing to invest not just in being socially responsible, but in telling their customers about it. In turn, the onus will be on social entrepreneurs to prove the worth of their endeavor relative to a corporate push for a piece of the responsibility pie.

Valuing the wallet of the consumer

Frankly, the best way to get consumers to buy a product is to appeal directly to them. Some companies promote their social aims enough that just getting the consumer to buy a product is enough to make them feel good and want to repeat their business. But the most successful “social enterprises” of our time are those that are actually geared more towards lowering costs for consumers, and little else.

Take sharing economy behemoths like Uber and AirBNB. Their social missions are ostensibly about collaboration and communication: Some people have goods, others need services—why not connect the two? Consumers love Uber because it has made getting a ride easier, but also more affordable, and the transportation revolution it sparked has helped raise the company value to the tens of billions.

In reality, Uber and AirBNB are now constantly under fire for the way they shift responsibility (and not profit) to the drivers, or for helping spur gentrification and inequality, respectively. They are beneficiaries of some of the worst tenets of capitalism: People love low prices and want them no matter what the cost is to others.

This flies in the face of what social entrepreneurship is all about, but not all sharing economy endeavors have this mindset. Juno, a new ride-hailing app that recently debuted in New York City, gives substantially more money to drivers per ride than Uber or Lyft. Because, while lower prices and a better service provide a positive social impact, it shouldn’t come at the expense of workers.

If social enterprises don’t take into account that consumers are only as loyal as their wallets allow them to be, they may not have a sustainable customer base to draw on going forward. The goal must be to balance social progress with, paradoxically, business ethics that revert back to the tendencies of old: Money over everything.  

 

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